Legislation Details
- Full Title: Federal Decree-Law Regarding Netting
- Law Type: Federal Decree-Law
- Law Number: [number] of 2024
- Issued Date: 01 Oct 2024
- Effective Date: 02 Jan 2025
- Official Gazette: No. 785
- Sector: Finance and Banking
- Status: Active
- Number of Articles: 45
- Chapters/Parts: 0
- Amendments: 0
Summary
This Federal Decree-Law regulates the practice of netting in the UAE financial sector. Netting is the process of offsetting payment obligations between two or more parties, reducing the final amount owed. The law defines the scope of netting agreements, qualified financial contracts, and collateral arrangements, and establishes their enforceability even during insolvency and bankruptcy proceedings. It aims to provide legal certainty and promote the use of netting to mitigate counterparty credit risk in the UAE. (Federal Decree-Law Regarding Netting, 2024, Art. 1-19) The law is significant for businesses and financial institutions operating in the UAE, as it enhances the legal framework for managing counterparty risk through netting. It clarifies the enforceability of netting agreements and qualified financial contracts, which is crucial for managing exposures and liquidity in the financial system. The provisions also protect the rights of parties involved in netting arrangements, even in the event of an insolvency. (Federal Decree-Law Regarding Netting, 2024, Art. 1-19)
What is the scope and purpose of this law?
The scope of this Federal Decree-Law is to regulate the practice of netting in the UAE. It applies to all netting agreements, qualified financial contracts, and collateral arrangements as defined in the law. (Federal Decree-Law Regarding Netting, 2024, Art. 2) The purpose of the law is to provide legal certainty and enforceability for netting arrangements in the UAE financial sector. It aims to promote the use of netting to mitigate counterparty credit risk and enhance the stability of the financial system. (Federal Decree-Law Regarding Netting, 2024, Art. 1-2)
What are the key definitions under this law?
The law provides the following key definitions:
- The State: The United Arab Emirates
- CBUAE: The Central Bank of the United Arab Emirates
- Financial Free Zones: Free zones subject to the provisions of Federal Law No. (8) of 2004 regarding financial free zones, or any other law replacing it
- Qualified Financial Contracts: Contracts stipulated in Article (5) of this Decree-Law
- Cash: Money credited to an account in any currency, or any other monetary claim for repayment of money, including money market deposits
- Netting Agreement: An agreement between two or more persons, stipulating that netting procedure shall be carried out in accordance with any of the cases referred to in Article (4) of this Decree-Law
- Multi-Branch Netting Agreement: A Netting Agreement between two or more persons, at least one of whom is a foreign party, under which any of the parties enters into a Qualified Financial Contract through its Home Office in addition to one or more of its branches or agencies located in countries outside its Home Country
- Person: A natural or legal person including, but not limited to, any company or corporation, any international or regional organization, bank or international or regional development institution, whether established under an international agreement or otherwise, and also including, but not limited to, any political subdivision or unit or entity owned by any political subdivision or unit of a central or regional government
(Federal Decree-Law Regarding Netting, 2024, Art. 1)
What are the main obligations and requirements?
The key obligations and requirements under this law include: 1. Parties must enter into netting agreements that comply with the definition provided in Article 4 in order for netting to be enforceable. (Federal Decree-Law Regarding Netting, 2024, Art. 4) 2. Qualified financial contracts, as defined in Article 5, must be final and enforceable. These include various types of derivatives, securities, commodities, and other financial transactions. (Federal Decree-Law Regarding Netting, 2024, Art. 5) 3. Collateral arrangements related to netting agreements or qualified financial contracts must also comply with the law's provisions to be enforceable. (Federal Decree-Law Regarding Netting, 2024, Art. 4) 4. Parties must ensure that their netting agreements, qualified financial contracts, and collateral arrangements are enforceable even during insolvency and bankruptcy proceedings. (Federal Decree-Law Regarding Netting, 2024, Art. 10) 5. The law prohibits any restrictions, suspensions, or delays in the enforcement of netting agreement provisions, except as provided in the law. (Federal Decree-Law Regarding Netting, 2024, Art. 14)
What licensing, registration, or approval requirements exist?
The legislation does not specify any licensing, registration, or approval requirements for parties entering into netting agreements or qualified financial contracts.
What rights and protections does this law provide?
The key rights and protections provided by this law include: 1. Enforceability of netting agreements and qualified financial contracts, even during insolvency and bankruptcy proceedings. (Federal Decree-Law Regarding Netting, 2024, Art. 10) 2. Limits on the powers of a liquidator to interfere with the implementation and application of netting agreement provisions. (Federal Decree-Law Regarding Netting, 2024, Art. 12) 3. Protection of the enforceability of a multi-branch netting agreement in the event of the insolvency of a foreign party's branch. (Federal Decree-Law Regarding Netting, 2024, Art. 16) 4. Prohibition on restricting, suspending, or delaying the enforcement of netting agreement provisions, except as provided in the law. (Federal Decree-Law Regarding Netting, 2024, Art. 14) 5. Provisions for the realization and liquidation of collateral related to netting agreements and qualified financial contracts. (Federal Decree-Law Regarding Netting, 2024, Art. 15)
Which authorities or bodies are responsible for enforcement?
The legislation does not specify any particular authorities or bodies responsible for the enforcement of this Federal Decree-Law. The law does not establish any new regulatory bodies or committees for this purpose.
What are the penalties for non-compliance?
The legislation does not provide any specific penalties for non-compliance with the provisions of this Federal Decree-Law.
What fees, charges, or financial provisions are specified?
The legislation does not specify any fees, charges, or financial provisions related to the implementation of this Federal Decree-Law.
What exemptions or exceptions apply?
The legislation provides the following exemptions: 1. Financial free zones and financial institutions licensed thereby are exempted from the application of the provisions of this Decree-Law, to the extent where there are similar legislations governing similar cases referred to in this Decree-Law. (Federal Decree-Law Regarding Netting, 2024, Art. 2)
How are disputes resolved under this law?
The legislation does not specify any dispute resolution mechanisms or procedures under this Federal Decree-Law.
What are the key deadlines and time limits?
The legislation does not provide any specific deadlines or time limits for the implementation or application of the provisions of this Federal Decree-Law.
How does this law interact with other UAE legislation?
The Federal Decree-Law Regarding Netting references the following related UAE legislation: 1. Federal Law No (1) of 1972, Regarding Jurisdictions of Ministries and Powers of Ministers 2. Federal Law No (4) of 2000, Regarding the UAE Securities and Commodities Authority & Market 3. Federal Law No (8) of 2004, Regarding Financial Free Zones 4. Federal-Decree-Law No (10) of 2018, Regarding Netting 5. Decretal Federal Law No (14) of 2018 Regarding the Central Bank and Organization of Financial Institutions and Activities 6. Federal Decree-Law No. (51) of 2023 on Financial Restructuring and Bankruptcy (Federal Decree-Law Regarding Netting, 2024, Preamble)
When did this law come into effect?
This Federal Decree-Law Regarding Netting was issued on 01 Oct 2024 and came into effect on 02 Jan 2025. (Federal Decree-Law Regarding Netting, 2024, Effective Date)
Source Documents
This article analyses Federal Decree-Law Regarding Netting for legal research and educational purposes. For the purpose of interpretation and application, reference must be made to the original Arabic text. In case of conflict, the Arabic text prevails. This does not constitute legal advice.